“As any player of online games can attest, the goal of most games is to win coins, tokens, jewels, or the like that are helpful in reaching new levels in the game,” Richard Bernstein, chief executive at Richard Bernstein Advisors, said in a note on Wednesday note. “Winning game coins or tokens is remarkably similar to ‘mining’ of cryptocurrency coins.”
The one significant difference between the game’s tokens and cryptocurrencies is that the latter can be traded.
“If only the founders of Candy Crush had realized that selling the coin could be more profitable than selling the entertainment,” said Bernstein. “Change the words ‘playing Candy Crush’ to ‘solving a sophisticated mathematical formula,’ and suddenly global currencies have been revolutionized,” he said.
Making things worse for digital currencies is that this tradability factor is actually what is driving the classic asset bubble that has formed over the past year, according to the note.
Bernstein added that cryptos’ price action matches the five signs of a bubble, which were outlined by financial historian and author Edward Chancellor: increased liquidity and turnover, democratization of the market, growing leverage, and rising new issues.
But, Bernstein also pointed out that the presence of a bubble does not mean that cryptos are no longer viable. Instead, it simply “suggests that the return-on-investment could be considerably lower than investors currently expect,” he said.
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To improve investors’ odds, traders should insist on regulation and oversight of the cryptocurrency market, which would limit fraud. “There are now over 1,300 cryptocurrencies and it seems reasonable to assume all 1,300 are not of equal quality,” Bernstein wrote.
The most popular digital currency,, has been trading around $8,000 this week, after managing to fall from an all-time high of around $20,000 just within the past four months. Bitcoin was last seen at $8,230.00, up 0.72% on the day, according to .
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